You have about a month left to impact your 2014 taxes. Tax planning throughout the year is the best way to strategize ways to save on taxes. However, now that we find ourselves up against the clock, there are still some last-minute tips that can be implemented.
As April 15 approaches, more and more taxpayers are getting a nasty surprise as they discover someone already has claimed their tax refund.
How could this happen? Whenever technology advances, criminals find opportunities to use it to their advantage. Now that e-filing tax returns is a requirement, it’s created a whole new way for thieves to use stolen personal information for self-profit.
Tax identity theft occurs when someone files a tax return using another person’s information, such as a SSN, to get a refund from the IRS. Thieves file dummy W-2 forms, knowing that the first return filed under a person’s identity is the first one paid, and any subsequent filing will be rejected. Victims often discover the crime only when they file their taxes.
In case you’re wondering, even if a taxpayer isn’t due a refund based on their income and withholding, that doesn’t stop criminals. They simply create a fake W-2 with figures that will ensure that they get thousands of dollars deposited into their account.
Meanwhile, the victim is left to pick up the pieces. Not only will they have to file a paper return and get a PIN number from the IRS to do so, it will take a minimum of 180 days for the agency to verify the valid return.
No one should make the mistake of thinking this is a crime that happens to “someone else.” Tax identity theft is rapidly rising every year, with more than 1.6 million taxpayers becoming victims in the first months of 2013.
In addition, the IRS says it had over 3,000 employees working on identity theft cases in late 2012, more than twice as many as in 2011. The agency also says that, from 2011 through November 2013, it stopped 14.6 million suspicious tax returns, which could have resulted in more than $50 billion in fraudulent refunds.
Even U.S. Atty. Gen. Eric Holder had a fraudulent tax return filed in his name last year, after thieves obtained his information via a black market internet site. The plot was foiled by the IRS before the return was processed.
This is just more proof that there’s no common denominator when it comes to tax identity theft targets. Criminals are happy to use whatever they can find, whether it’s deceased taxpayers’ information or that of a college student.
As evidenced by the hacking of Target, Neiman Marcus and other high-profile companies, you can never be too vigilant about protecting your personal information.
While some things may be out of your control, such as data breaches or spyware and Trojan viruses, there are things you can do to decrease your chance of becoming a victim. Remember:
• The IRS will not call, text or email you for information. It contacts taxpayers only by mail.
• Never give out personal information such as your Social Security Number over the phone or provide it via email.
• Be alert to people standing in line behind you who may be looking over your shoulder when asked to enter a SSN number or PIN.
• If you do your own taxes, work only on a secure network – never use the public Wi-Fi in a coffee shop. Also be sure to equip your computer with anti-spam and anti-virus protection.
• Never leave your purse/wallet unattended, and never carry your Social Security card with you.
• Shred all sensitive documents, such as drafts of your tax return.
• File your return as soon are you have all the necessary tax info.
• If you have a mailbox, retrieve mail promptly.
• Research your tax preparer, and be wary of any firm promising overly large refunds. Choose reliable and experienced tax services in your area.
What to do if you become a victim:
• Call the IRS Identity Protection Specialized Unit at 1-800-908-4490.
• Freeze your credit report file at all three major credit bureaus to prevent unauthorized accounts from being opened.
• The Federal Trade Commission also suggests filing an identity theft report with your local police department and online with the FTC.
Dale Hammernik, owner of Hammernik & Associates, has almost three decades of experience as a tax advisor in metro Milwaukee. Based in West Allis, he is an Enrolled Agent and an Accredited Tax Advisor.